A Study of the J-Curve for Seven Selected Latin American Countries

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This study finds that there is evidence of a J-curve for Chile, Ecuador, and Uruguay and lack of support for a J-curve for Argentina, Brazil, Colombia, and Peru. Increased real income in the home country would improve the trade balance for Brazil and Ecuador and deteriorate the trade balance for Argentina, Chile, Colombia, Peru, and Uruguay. Increased real income in the U.S. would improve the trade balance for Argentina, Chile, Colombia, Peru, and Uruguay and deteriorate the trade balance for Brazil and Ecuador. Hence, the conventional wisdom to pursue real depreciation to improve the trade balance may not apply to some of these countries.

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